Saturday, January 17, 2009

No necessity for a rent cap in 2009: RERA

According to Marwan bin Galita, the Chief Executive of Dubai's RERA, a rent cap is not necessary year.

The companies are cutting down on allowances, and the cutbacks are hitting the rental market in Dubai. According to property agents, the rentals of luxury properties, dropped by 25 percent last month.

Residents in Dubai are still confused about the necessity of a rent cap in 2009, while the cap for 2008 was set at five percent. However, in the opinion of Bin Galita, a rent cap is not required in 2009, as the current year, being a tough one may not interfere much with rents. But, the rental rates should be fair to both tenants and landlords.

Rents in Dubai would begin to decline in third quarter of the year. But, with the market witnessing correction, commercial properties seem more affected than residential.

With increase in job lay-offs, it is likely that more families would leave the country, thereby the availability of apartments and villas would increase. To add to this, about 32,000 new housing units are likely to be released this year, which would further increase the number of units available in the market.

However, as of now, the Gulf News has reported that in the absence of a new announcement, the current five percent rent cap would remain valid.

The Rent Committee feels that the landlords still cannot increase rents beyond five percent, and tenants are free to file complaints against landlords if there is a violation to existing law.

3 comments:

sunil said...

the rent cap is a sensitive matter. there are private interest groups that are lobbying to keep it intact. the government of dubai wasn't born yesterday either. therefore the cap you see might be in effect on paper, but in actuality the true economics of dubai will determine how rents react this year and next. look for property values to decline severely over the next 24 months in dubai. this will drive rents lower, demand lower (people leaving due to no jobs) and increasing defaults as home values will be much lower than the outstanding mortgage owed on the properties. buckle up and hang on tight to your cash. it is king after all...

Anonymous said...

RERA needs to wake up to reality! The issue is not a fall in demand or greater availability of rental stock. The real issue is that if the rent cap is removed, tenants who have been in the same apartment at rents that were 4 years old have paid nominally increased prices. Even in the 'depressed' scenario market price is likely to be twice of what they are currently paying. It will take atleast two years for rents to fall to levels seen 4 years ago and till then the rent cap should remain firmly in place. A failure to do so will see shortsighted landlords hiking rents for older rented properties and people will vacate these proerties and move out of Dubai forever! That will really crash the rents and prices of real estate. The Government of Dubai needs to be aware of this likely outcome.

Anonymous said...

I have bought a house last year in the Springs and renewed the tenancy contract cheaper than the year before to the tenants. That's 6 monthes I do not get any rent and that I am lost in legal procedures with Dubai Rent Comittee, I am broken, cannot do anything. All Landlords will soon keep their house empty rather than renting out, nothing is done to protect Landlord if tenants refuse to pay. Impossible to evict them.